Steve Jobs was a force of nature. His ability to dream and then make real the iPod, the iPhone and the iPad made Apple (NASDAQ: AAPL.US) one of the world’s leading companies. By the time of his sad passing in 2011, there was such a cult of personality built up around him that it seemed his was the act that could not be followed.
I don’t think it was a coincidence that, a year later, the Apple share price plunged. Many commentators, perhaps me included, were quick to judge: Apple was a one-man company; after Steve Jobs the business would soon lose momentum; Tim Cook was able to run the company on a day-to-day level, but where was the vision? Where was the creativity? Surely such amazing success could not be repeated.
Building on the culture that Jobs created
Now, with retina HD hindsight, we can see things more clearly: 2014 was the year Tim Cook came out of Steve Jobs’ shadow. Tim Cook was no longer the misfit who lost the spirit of the company, much as the spirit of the company was lost when Jobs first left, in 1985.
Instead, he seems to have strengthened and broadened the culture of world-leading innovation that Jobs created, taking the positives and building upon them. He was not so much David Moyes after Sir Alex, or John Sculley after Steve Jobs, but perhaps Bob Paisley after Bill Shankly.
This year, with the launch of the iPhone 6, iOS 8, new iPads, Apple Pay, and next year the Apple Watch, Cook has been scoring hit after hit. Each iPhone launch seems bigger than the last, and that was the case this time too.
Many kinds of perfection
What’s more, Cook has noticed that, in a world of endless choice, you can be too much of a perfectionist. Instead of trying to find the Platonic ideal of a smart phone, which seemed to be Steve Jobs’ obsession, he has realised that more variety means that there are more routes to a customer’s happiness. Yet each of these varieties seems to be its own kind of perfection.
The net result of all these launches is that since the lows of June 2013 the share price has been on an inexorable upward trend. The numbers are mind-boggling. Apple’s market capitalisation is now $637bn, making it the most valuable company there has ever been. 39 million iPhones and 12 million iPads were sold last quarter, and since the launch of the first iPhone, a total of 500 million have now been sold.
At a P/E ratio of 14.1, with a dividend yield of 1.7%, the company is not expensive. But with the share price having risen so much already, Apple is no longer the value play it was last year, and personally my contrarian instincts are telling me to be wary. It is now a momentum investment. Yet who would argue against the momentum that Apple is building?